Save Major Cash with Cost Segregation
A cost segregation study re-classifies your building’s components (like the lighting system) into shorter recovery periods so you can write off the components faster in your taxes and reduce taxable income. The study carves out certain qualifying portions of your building into five-, seven- and 15-year lives that are normally accounted for in 39- or 27.5-year categories.
Cost Segregation can complement the benefits of 1031 Exchanges. With the uncertain future of the 1031 Exchange program, property owners that have used this program should consult with a Cost Segregation expert to plan ahead.
When Should I Get A Cost Segregation Study?
You can have one done on your building anytime, but it’s best to do it right after you’ve purchased your property so you can write off assets removed during remodeling or replacing building components. If you do a study right after acquiring your building, you’ll be able to claim bonus depreciation, which can create a write off as high as 30% of your total purchase price in the first year.
How Do I Get A Cost Segregation Study?
Only a specialized company with both engineering and accounting capabilities is capable of undertaking a full-fledged cost segregation study. SR Advisors is a licensed engineering firm that focuses on federal, state, and local tax benefits. Through our cost segregation studies, SR Advisors work to uncover potential tax savings and increase cash flow.
Cost Segregation Study Application Process
Bonus Depreciation Example
| Existing Real Property Acquired | Prior & New Law | Prior Law | New Law | |||
| $2,500,000 Purchase (excluding land allocation) | SL 39-Year Depreciation withou Cost Segregation | Cost Segregation MACRS (no bonus) | Cost Segregation MACRS (with 100% bonus) | |||
| 5-year Personal Property | 0% | $0 | 24% | $600,000 | 24% | $600,000 |
| 15-year Personal Property | 0% | $0 | 6% | $150,000 | 6% | $150,000 |
| 39-year Real Property | 100% | $2,500,000 | 70% | $1,750,000 | 70% | $1,750,000 |
| Approximate 1st Year Depreciation | $64,103 | $172,372 | $794,872 | |||